What Advertising Media should you use? Media by ELM Appeal

Media Mix by Appeal Type-ELM Model-StratoServe (Originally published April 16, 2014, Updated January 2, 2020)

The ELM (Elaboration Likelihood Model) is a popular way of looking at how customers are persuaded by type of appeal. The ELM appeals are a great way of looking at how you might want to make your advertising media choices. But first a quick re-cap of the ELM persuasion model.

The Elaboration Likelihood Model (ELM) of persuasion by Petty and Caccioppo (1986) suggests that folks get persuaded by one of two routes in the mind.These are:

  • Central Route to Persuasion: The Central Route of mental processing in a customers mind involves logical, conscious, deliberate thinking about a marketing message. Here the advertiser tries to persuade by logical reasoning. You can use data, graphs to support your message. Examples where the Central Route persuasion works are high involvement products. These include high tech products like Computer external hard drive (Solid state vs. not), Face masks ( N95 vs. non-surgical). Also for expensive products like new sports cars where the buyer would like to compare features. The customer decides through her/his head not heart!
  • Emotional Route to Persuasion: Here the customer is swayed by appeals to her/his emotion. Here the customer is convinced by appeals to emotion. You use images, video to pull at the customers’ heartstrings. Generally all low cost consumer products fit into this category including most grocery store items. Some high priced items like critical medicines and medical treatments can have powerful emotional appeal. On a positive note expensive diamonds and vacations are also sold on emotional appeal.The customer decides through her/his heat not head!

If you are an advertiser, then you need to consider how your customer is likely to process the advertising message that you want to give them.  The Media by Appeal graphic with this post is a simple way of looking at what media is best for your message:

  • Television is great for reaching large audiences. If you advertise on TV, your Ads must tap something emotional in your audience. If it does, then your Ad might become viral on YouTube. The “non-thinking” nature of television is one reason that it is called the “idiot box.” Somewhat unfair, because TV is very effective depending on your advertising objectives and budget.
  • Radio is great when you want to reach people somewhat emotionally. The person is driving to work and has the radio on. If your ad is memorable you can expect the person to go back to home or office and check you out on the Internet.
  • Outdoor is effective when you want to build awareness of your brand and have a simple message. When someone is driving fast  and seeing your outdoor billboard- you do not want to explain how to make cake from your cake mix in six steps!
  • Leaflets/Direct Mail can get more detailed. When people are looking for a pizza coupon, they might go through the leaflet you sent out last week. Direct Mail can get really heavy on logic and reading-understanding. Just think of all the material in a credit card mail offer.
  • Magazines are wonderful for very narrow targeting and niche marketing. Someone who subscribes to a cooking magazine is really interested in reading your cake recipe details in a paid ad.
  • Internet Search advertising is relatively recent and fits into the ELM appeal thinking fairly neatly in the logical appeal category. When you put out a Google AdWords search ad ( or any other pay per click- PPC ad on Yahoo or Bing) it shows when someone is actually searching the Internet. You pay for the click and you know that the person came to your website.  A bit like searching for the pizza coupon in the pile of leaflets- only much easier.
  • Internet Banner is more about emotional appeal first. You see the banner for cake mix in a baking web forum and you are taken to the cake mix website where a great offer is made. It is also possible for the banner ad to follow a prior interested customer through other websites as a sort of reminder. Technology allows the ad to follow you around (through remarketing) including on Facebook,Instagram,Twitter,Pinterest,Snapchat, as you traverse the web.

All media have strengths and the advertiser needs to figure out what might work best for their target market and particular message using the ELM appeal thinking. Remember(see our 2013 post) in the customer journey can be over 9 contact points before someone buys.

( Dear Readers, The above post was originally published on April 2016 and is updated January 2, 2021 due to our readers interest in the topic)

About StratoServe.

Derived Demand: Why B2B Marketers Should Care

B2B Derived Demand-StratoServe (Updated 2021 from 2014)

“Derived Demand” is an early topic in the study of B2B marketing but the concept remains fuzzy to students and industry alike. If you Google “Derived Demand” you are at once launched into a bunch of economics concepts that do not explain clearly what the term means for B2B marketers. So here is an attempt to make the concept clearer.

What is Derived Demand in Marketing? Derived demand refers to demand for your B2B product or service -that depends on the demand for where you product is used and then ultimately consumed at the B2C level.

Every B2B product has a consumer who ultimately pays for it. This is Derived Demand.

Not caring about the final B2C Customer is a big B2B Marketing Mistake.

Dr. Roy at StratoServe

Here are some examples (updated 2021 from the original post of February 13, 2014 due to the interest in the topic from our dear readers):

  • Aircraft Sales: John Leahy is the retired $1.7 Trillion (Yes Trillion) dollar salesperson for Airbus. who sold 16,000 jets to world airlines in his career. You can be sure that Mr Leahy always was super alert to the requirements of the flying public. When you fly – the ticket prices paid to an airlines (B2C) ultimately funds the aircraft the airline bought (B2B).
  • New Housing Demand: With COVID there is a great demand for housing in more rural areas as people try to leave crowded cities. This demand is a a great leading indicator not only for construction jobs but also for all kinds of building materials and derived demand for appliances like cooking ranges, refrigerators etc. Any business supplying parts to appliance makers can expect an increase in demand.
  • Digitization and services demand: As more and more activities have an increased digital component(more after COVID) , you hear of the need for programming skills to write and modify domain specific software programs. These are derived demand scenarios that can be useful to software providing firms, education and training providers as they try to map out the opportunities of the future.

Historically, as Investopedia mentions, the California Gold Rush (1848-1855) was going on, you could  be sure that there was demand for picks and shovels used to prospect for gold. Upstream in the supply chain, picks and shovels should improve the demand for iron/steel for the metal part of picks and shovels. Some business entity would need to put the metal parts to some kind of wooden handle to make a tool. So if a business made wooden handles for a different application ( for example, as broom handles) they thought of broom making companies as their B2B customers. The news of  the California Gold Rush would have motivated a 19th century wooden broom handle maker to develop a  new product , ie the pick and shovel handle! Such an entrepreneur would mobilize the sales force to reach out to manufacturers who might need a better wooden handle for the gold prospector B2C market.

So where do B2B businesses miss out? Here are some thoughts:

  • B2B Businesses think ex-factory not customer’s customer: Most organizations are so caught up in their production process ( yes software writing is a kind of production) that what they would like most is to sell “ex-factory,”  i.e. no concern what happens next in the value chain of their product or service. Instead B2B folks should really care about what the final consumer is going through. Thus, a component supplier to a machinery maker must at least be interested in where the machine  is used, what is produced and how consumers experience the final consumer product. For ultimately, there is a consumer who pays for everything.
  • Value Chain  Market Research : Ongoing value chain market research can help and this is simple to do today with the Internet. Just think of your customer’s customer and check how that industry is doing. For example, if you supply carpeting for new housing, some quick Internet searches gives you the formal new housing trends expected by economists and the kinds of carpets prefered  from the interior decorating industry. Armed with this information when you can get your next meeting with a major builder, you can get guidance that is very specific and difficult to find on the web.

Focussing on providing value to your B2B customer by trying to understand your customer’s customer is a useful step in staying on top of derived demand in your industry.

We wish our readers a Healthy,Happy and Safe 2021!

About StratoServe.

B2B 6: Do you like being judged? Marketer tips for Supplier Evaluation

The sixth and final step in the B2B buying process is supplier evaluation by the Buyer Organization. And frankly, no one likes being judged! But evaluations are a must in every aspect of life – if we are to develop,improve and evolve.So too with supplier evaluation. As a B2B marketer it’s good to have a growth mindset. Because it keeps you and your organization nimble and agile no matter what the changes in technology and globalization.

First let’s look at scenarios in both challenging and good times:

  • Challenging Times (eg. 2020) : Since the buyer business is paying you- you are a cost. Unless the economy is booming, all costs come under review. These include employees, indirect spend and direct spend. During the COVID-19 pandemic you know many friends who got laid off. Also how those with jobs had to cut all non-essential expenses. These non-essential expenses tend to be indirect spend like rent and electricity.(Why are we paying for rent and electricity when everyone is working from home?). The pandemic will be thankfully behind us by mid-2021 with the vaccine. However, just thinking back on the pandemic’s financial toll will remind us of how cost cutting works. Just because direct spend is on directly what the buyer organization produces does not guarantee that you’ll have orders in slow times tike 2020. There are two reasons:
    • There is a competitor product or solution that is more effective in doing the job.
    • There is a slowdown in the derived demand. Think of the institutional market for milk in schools and beer in bars. Producers had to drain huge quantities of both beer and milk during the pandemic.
  • Good times ( eg. mid 2021-hopefully): If you think back to 2019, the economy was doing great. Hopefully, things will be back after mid 2021 as the virus comes under control. As markets pick up and new products are launched, there will be need for agile,innovative,responsive suppliers. It is at these growth times that your past performance with a client becomes a predictor of future performance. Your great work starts paying off.

Here are some tips for marketers to make the most of the supplier evaluation process that should work in both good and challenging times:

Step 6 B2B Buying Process- Marketer Tips -StratoServe
  1. Above all look out for your client’s success: Your client has hired you for a purpose. Try to have your organization and delivery team understand that purpose. Ideally all should try to do their best to make the client succeed. Purchase orders mention product, quantity price and payment terms but do not explain what the buying organization wants to achieve with the purchase. It is the B2B Marketer’s job to explain to her/his internal organization what the goals of the client are and how they can help.
  2. Maintain the same account team: It’s your people who need to make your B2B relationship work at all levels. Think of the last time you saw a Coca Cola or Pepsi truck delivering product to a large cafeteria. It’s very likely over time the driver gets to know several people at the cafeteria including the receiving person, the shift manager and even the manager. Cafeteria workers may not be decision makers for the next contract. But they can provide positive evaluation feedback.
  3. Timely reporting systems from the field: Have a formal quick and easy reporting from the field. For example you supply a product to the factory floor of the customer or you are responsible for filling shelves at the store. Generally you delivery person has a hand held device that she/he fills in checkboxes for records. If your person learns about a trial going on of a brand that was not there last week then this information must flow back to your product manager. If you have the timely signal from the field, there is action you can take. Simply asking the customer “what’s going on” might reveal that there is a new technology based substitute that is being tried out. We believe that it is a lack of timely reporting from the field that contributed to entire industries being wiped out in Christensen’s Innovator’s Dilemma.
  4. Accounts Receivable Contact: If your accounts receivable person follows up with your client’s accounts payable person, they too have a marketing role. Remember that the accounts payable person is part of your client’s finance team and a good word will not hurt.
  5. The CMO should get the CEO to be involved: The Chief Marketing Officer (CMO) is likely to be involved in large accounts. However, if the CEO is a non-marketing person it’s very important to find a mechanism where the CEO has contact with the client’s CEO. Why? because talking to the CEO of the supplier for a few minutes gives great comfort to the client CEO and to the client organization. And virtual meetings should work.
  6. No shortcuts- rapid response: Performance does count and strong B2B relationships can give you some cushion. But not a lot in competitive markets. If there is a quality or performance issue with your product the first step is acknowledge failure. Next ensure that the problem does not repeat. Share your actions with the client so that you maintain trust.
  7. Be alert and flexible to opportunities: Just as many jobs are not advertised, so too with new B2B opportunities. Because you are there and dealing with the client organization on a daily basis it’s important to take up on opportunities. For example, whether you can create a prototype of something new. Try to say yes as big opportunities tend to start small.

Most industries are well networked and good work gets noticed and shared. If your organization’s reputation and reliability is good your business will grow.

We wish our dear readers a Very Happy, Healthy and Successful 2021!

About StratoServe.

B2B 5: Purchase order is the start of your B2B relationship

Once you get the purchase order (PO) as a new supplier: Congratulations! Your B2B relationship just started. Why? Because it gives you a reason to stay in touch, no matter how small the order. It allows you to designate account managers who manage the account. Depending on your industry the relationship manager at the selling company keeps track of everything going on. In software and SaaS businesses the “Customer Success” role tries to help the customer get the most out of your product.

A great way to think about a B2B relationship is the long and happy human marriage versus a one night stand. See Dwyer,Schurr and On 1987, Journal of Marketing.

Note that your first purchase order is the start of a great long-term relationship with the buying organization. In the following suggestions stand-down (withdraw your point) if any of your questions at this purchase order stage is perceived problematic.

StratoServe

By now knowledgeable people, particularly users in the buying center, have vetted your product or service.Just like a competitive job offer is not withdrawn if you ask questions, so too with purchase orders. Do ask questions along the lines of ” We are starting new here, are there common problems you see with other suppliers? We want to be sure that we avoid frequently occuring mistakes.” You can be sure that experienced purchasing people will come up with several problems they face. Recognize, that after the PO is issued the only thing that the purchasing department wants to avoid is a stock out or material rejection due to quality reasons. Also a big way that purchasing people demonstrate their value in organizations is how much they “saved”. See an earlier blog post on Five Differences between B2B Marketing and Supply Chain Managers.

Purchase orders are handled by the Supply Chain or Purchasing Department that frequently reports to the CEO or CFO or Head of Manufacturing/Chief Operating Officer. Here are some tips for the B2B marketer to make the most of the fifth stage of the B2B buying process:

Start by thinking what Purchase order terms are still negotiable? The answer depends on the 1) The systems and processes in the buying organization 2) The context and reporting of the purchasing department:

  • Systems/Processes: Depending on the degree of computerization and ERP implemented, organizations fall into a spectrum. At the low tech end you might see spreadsheets being used with printed purchase order forms and printed general terms of purchase. The printed sheets lists things like a Force Majeure clause. Here a lot of human input is required and probably there is some leeway on some items- like payment terms. At the other tech end it is theoretically possible that the successful RFP bid info is fed into the purchase order directly. However, most organizations are not completely automated from RFP to Purchase Order. Even when RFP-PO process is automated, it’s possible to ask for changes – so long as it does not harm the interests of the buying organizations.
  • Who does Supply Chain Report to ? Supply Chain professionals keep fighting professionally for the CxO position. This position might be called Chief or Head of Supply Chain and is considered a part of the top management of the organization. Many organizations do have the “Chief Supply Officer” but many do not. It’s worth finding out early in the B2B process how things work at your prospect organization. Here are some possible scenarios:
    • Chief Supply Chain Officer: If there is a Chief Supply Chain Officer reporting to the CEO then you can expect a more strategic approach from the buyer dealing with your product. You can expect a longer term view and there might be flexibility in payment terms like 90 days instead of 180 days.
    • Reports to CFO: The Chief Finance Officer (CFO) is likely to be more rigid about payment terms. This rigidity is not because of the “bean counter” stereotype of CFOs’ but their jobs. Recognize that they are trying to fine tune finance charges and have their own funding and loan issues to think of. In such situations it’s good to think about your own bill discounting or letter of credit through banks.
    • Reports to Head of Manufacturing/Operations: In such situations the most important criteria is to ensure that your quality and delivery times are perfect.

To summarize, at this fifth step of the B2B process, this is your opportunity to build a great B2B relationship.

We wish our dear readers a Merry Christmas!

About StratoServe.

Why comparison of bids is a great B2B Marketing Opportunity

The 4th Step in the B2B Purchasing Process is comparison of bids received. This can be a great B2B Marketing Opportunity for new suppliers trying to get in .

Here is why:

Deciders in the Buying Center are unlikely to see all the bids in detail. Generally the initial shortlisting work is done by someone from the user department and/or the purchasing/supply chain department. These two shortlisters are likely to be solid but junior professionals. Their primary task is not rejecting viable offers from the shortlist. A bidders’ goal should therefore be to appear as a viable vendor in the documentation submitted.In addition, your web presence must support what you are writing in the bid documents.

To clarify: the B2B Marketing opportunity for new suppliers, happens only when your bid reaches the buyers’ shortlist. Only shortlisted bids will appear in comparative analysis. This analysis would include a comparison of features, prices, after sales service, warranties etc. Do not assume that price is most important as it rarely is in B2B markets, unless the supply item is a commodity.

So how do you get into the shortlist? Here are some pointers:

  • Think of your bid documents as a job application: Your B2B customer needs a job to be done, and that is why the RFP is issued in the first place. Just like job description, RFPs’ tend to also have something equivalent to “Essential Qualifications” and “Desirable Qualifications”. Your bid documents should establish that your company has all the qualifications needed.There are three types of resource people in your organization , you need to tap for the coming up with an effective RFP. Effective RFP’s are those that get you into the vendor shortlist:
    • Your most market aware – salesperson: This is someone in your team who is most “clued in” or market aware the industry and market you are trying to submit your RFP. Ideally, this person has contacts or friends in that industry or is able to find friends/contacts. With LinkedIn it’s not hard to reach out to Buying Center folks and establish a connection. Sometimes RFP’s have the name of the contact person and its best to ask your questions directly to the concerned person.RFP’s do want to generate several great offers from suppliers. So if you have questions- Ask. Just make sure that the person who is doing the asking is knowledgeable about what you can do and is market aware. Even if you do make the shortlist you need to give the impression of competence and confidence even when you seek clarifications on RFP’s.
    • Your team member with the best academic grades: Those students who get the best academic grades have one major ability. The ability to respond appropriately to the exam questions. They have a great sense of what the examiner is looking for and they deliver and get those “A” grades. This person is usually not your best salesperson (everyone does not have all skills!) and could work in another department. Once you have a draft response ready get this academically inclined person to review your submission to check : Do the bid documents address the RFP requirements? In other words the review should identify anything missing so that the submitted documents are comprehensive,concise and complete. You really want the bid documents to look so professional that the supply chain folks feel like “winners” bringing your RFP documents to the review meetings. Excellent bid documents get discussed and several members of the buying center get to know your brand.
    • Your agile digital and web person: Once the bid documents are getting ready, it’s a good idea to update your website to ensure that all related materials are also mentioned prominently on your website. You can expect that the buying organization will be Googling you. If you are already advertise digitally, consider starting a brand awareness campaign highlighting the capabilities you showcase in your bid documents.
  • Follow up : When you follow-up be polite but persistent. Your persistence shows that you are interested to become a supplier. Also offer to do a meeting. In the post-Covid world you can offer to meet via Zoom and we predict that meetings will become more effective via video. Reduction in travel time might allow you to talk to different buying center folks in different locations. Depending on your product or service it is usually possible to get a trial order that allows the organization to get to know your brand and its associated people.

To summarize, for the B2B Marketer getting into the RFP shortlist is a great way to build your brand with the buying company.

About StratoServe.

B2B Process 3: Request for Proposal- RFP does not mean Equal Opportunity

3.B2B Process -RFP-StratoServe

The third step of the B2B Purchase Process is the Request for Proposal (RFP). As our dear readers have learnt, just because the job description is detailed and you check all the boxes, you do not get a job interview! Similarly, from the point of view of the B2B Marketer responding to RFP’s does not mean that there is equal opportunity for all vendors.

Unless there is a huge demand for your product or skill.

For example, in the early days of the coronavirus pandemic , if you could supply PPE (Personal Protection Equipment) like N95 masks, gowns and you responded to an RFP, you were likely to get a positive response. Because health systems worldwide were in crisis for these supplies.

In normal times though, two words : “Forget it”.

So how does this RFP thing really work? Who uses it? How can you get into serious consideration? Here are some pointers:

Why and Who uses RFP? Any entity that needs to have a paper/documented trail that there was no nepotism or corruption in supplier selection uses RFP. Auditors don’t look kindly when you purchase high value stuff from the cousin of the CEO. But if the company is privately owned with the CEO’s family owning 100% shares- there is no need for a systematic, documented purchase process. Although it’s desirable to keep things transparent for family member owners, to avoid future family conflict.

These entities include Federal and State Governments, Government owned agencies. The oversight process include formal audits, opposition party and media watchdogs all have a job to do. This encourages the purchasing function to follow documented procedures and proper authorizations before contracting to spend organization funds.

The US Federal Government is the largest B2B buyer also B2G (Business to Government) buyer in the world. The US Federal Government’s 2019 spending was $586 Billion as per the US Government Accountability Office.

How do you keep up with relevant RFPs? In the post COVID world you can expect that RFPs will be available online. Once you have a clear idea of your target market defined by company, government agency etc. it is possible to create Google alerts to learn about upcoming opportunities. The US GSA offers useful advice , as do avariety of vendors. Just search for “Open RFP in (name of your product or service) in ( locations that interest you).

Will you get an order the first time when you respond to RFP? The short answer is No.Read on to understand why.

So all the effort of responding to the RFP is a waste? Responding to RFP becomes a lot of work for the team. In old industries like construction there are estimating softwares developed over the years. In new industries like artificial intelligence and biotechnology it can be hard to estimate how much an expert employee will cost.Or even if you would be able to find the employee, once you start searching. After getting the order! And No, the responding to RFPs is not a waste. Because the procurement folks have to read, analyze your bid as part of their job. Your company’s name comes up in documents and discussions with the rest of the Buying Center members. Thus, responding to RFPs build your brand awareness. Frequently, you should be able to get a face-to-face meeting which becomes your pathway to get a trial order and regular orders.

Be prepared for a long sales cycle of several RFP rounds. Many B2B marketers get dejected after their first failed RFP submission to an organization. As explained in the B2B process steps, there is a lot of context to what goes on in organizations. Be prepared for a long haul and follow-up every failed bid. So that your next bid is better. The reason the sales cycle is long, is because the buying center needs to get to know your brand.

Persistence, in dealing with RFP opportunities is the key to long term orders for B2B marketers. And eventual equal opportunity as a supplier!

About StratoServe.

B2B Process 2: Why does product specs/SoW feel like a rigged job description?

2. B2B Buying Process – Specifications/SoW -StratoServe

In Step 2 of the B2B Buying Process, the buying organization develops the Product Specifications/Scope of Work (SoW). This is the document that will be put out for request for proposals (RFP) or tenders. If you have never supplied to the buying company, and you are generally capable, you can face a sudden roadblock. That roadblock feels similar to rigged job descriptions that our dear readers have all experienced. Because … there is an internal candidate!

There is nothing nefarious going on. It’s just the nature of organizations that they need to get something done. For all B2B suppliers who want to serve new customers, B2B Marketing and Sales efforts do help as depicted in the visual above. To make the B2B marketing efforts effective, it is useful to understand what could be going on as specifications are being drawn up at the buying company.

Here is how the B2B Process for the specifications stage plays out:

The B2B Buy is ongoing: Ongoing purchases are also known as the “re-buy task”. The items might have started informally (like forged metal parts) and local manufacturers started supplying the part. Now the volume had grown and the finance and audit folks point out that this is getting big. It should have a formal purchase process. You must invite bids, compare offers, negotiate and place orders with suppliers who have the right price quality offer. Now what would a supply manager/purchasing manager do? They would talk to existing suppliers whose products are already working. They talk to the B2B sales folks for draft specifications. What do the B2B Sales folks of existing suppliers do? They go back and ensure that top leadership is involved in two ways (a) Ensure that they stay in once the purchasing becomes more formal (b) Throw in some specification that only they can do with current or ordered machinery, skilled folks etc. For example, merely mentioning a specific software language or integration can lock out competitors. Once the purchasing folks have some draft specifications, they’ll put together something and call for bids.

Once the call for bids is out- it may be too late: Because the whole point of a formal purchasing process is to compare “apples” to “apples” and not apples to oranges. It is therefore, during the specification process that B2B marketing and sales efforts must be very active for any suppliers who want to get in. Digital marketing (expect the purchasing/user folks to Google something) and sales emails and sales calls can get you a place at the table. See Buying Center.

Modified ReBuy and New Task Buying: In many new task and modified rebuy situations, the process will include internet searches for sure. Even more so, with all the remote working after the Coronavirus pandemic. Internal experts , like R&D scientists and hired consultants can have a huge say in developing specifications. These consultants could include architects for building products, management consultants for all kinds of software and systems. The existing suppliers have an advantage here because if they maintain a close helping relationship with all members of the buying center, it’s very likely that they will be informed and sometimes encouraged to diversify into the new task product. This is very similar to being tapped for a new job, within the same company.

To summarize, existing suppliers have a huge advantage in B2B markets – if they are alert and open to new opportunity. Strangely, they don’t jump on new opportunities or technology and the alert and new entrant can jump in.

For suppliers, being visible through digital marketing and sales is the best option to have a chance to shape the specifications in the B2B Buying Process.

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“Business need” starts the B2B buying process

B2B Buying Process – Step 1- Business Need by StratoServe

If you research “B2B buying process” you’ll come up with the steps that a business goes through in the B2B buying process. These include (1) Business need recognition (2) Developing specifications of what will meet the need (3) Request for proposals (RFP) (4) Comparison of proposals/bids and negotiate with suppliers (5) Purchase order placement (6) Delivery and receipt of goods or services (7) Evaluation of suppliers.

Sure, the above process occurs in some form but it is not sequential. Neither does it account for the marketing and sales efforts of vendors. This series of posts explains each step as it really plays out in organizations. We believe that understanding the B2B buying process helps everyone understand the customer’s context. We start with “Business Need Recognition”.

Here are three ways to think about Business Needs

Business needs are not whimsical. As a consumer we can buy small ticket items on a whim. We like something because we saw it on the shelf, saw an ad – we like it and buy it. In contrast , for more expensive products like cars, consumers put in more research friends and family members can be involved. Businesses are not whimsical even for small ticket items. As a business team leader you can buy cake with your P-Card to celebrate a team member’s birthday.Chances are that company policy encourages spending on team building activities and most teams at that location celebrate birthdays. Similarly if you are the manufacturing manager it is unlikely that you’ll pick up hardware spares for your main machine on your next trip to Home Depot. Why? Because a 10 cent hardware piece might be so critical that your factory might shut down in case of failure. The hardware will go through the buying process.

There is a business purpose. The business has its own customers. It’s success depends on its customers continuing to buy. Thus the biggest focus of any business is Direct Materials including equipment,software that goes to make the product. That finished product is what gets them paid by their customer. Then there is a lot of goods and services that support the main purpose of the business. These include buildings,furniture,stationery,travel and transportation etc. These supportive purchases are often called “indirect materials” where the Supply Manager or Purchasing Manager has the biggest role. Why? because these items are like commodities and are easier to compare on feature and price.

  • When Business Purpose is Continuing – Repeat Buy. Imagine a cookie brand ( eg. Oreos) where consumers keep buying the same brand. The ingredient suppliers to the Oreo factory like flour, baking soda, chocolate powder are in a repeat buy process. See our Buy Task post. It’s hard for a new supplier to get in because the incumbent supplier is working for years and has deep relationships across the buying organization.
  • When Business Purpose Changes- Modified rebuy. Modified rebuy can be thought of as a modification in the final product. Let us think of Oreo in a new flavor like strawberry. First the Oreo factory will ask their existing flavor suppliers if they can supply strawberry flavor. And most suppliers in B2B markets are eager to please and there is only a little chance for a new supplier to make inroads.
  • When Business Purpose is New- New Buy. A “New Buy” happens when the Business is facing a challenge and needs to find new suppliers. For example, before the Coronavirus grocery stores and restaurants had no suppliers for face masks and sanitizers. Today, after eight months of the pandemic an entire industry has grown around Personal Protective Equipment (PPE). Any business or organization that has a physical place of business has PPE as a prominent”New Buy”. For many heavy PPE user businesses like facilities maintenance these items have become repeat buys. Just like the Coronavirus has (sadly) opened up the market for face masks and sanitizers, there is always some change in the lives of customers that compels businesses to go for a “New Buy”.

Startups and Innovators face an uphill task to inject their product or service into the buying process. The marketing process for such companies is made much easier if they place themselves in the shoes of a business in their target market. The target market frequently has their own marketing challenges. For persistent marketers of innovation, who truly understand their target markets problems – an opportunity to showcase success soon comes along.

How Strategic is the Purchase? Even among direct materials, some items are strategic and quite literally “the family jewels.” See Risk-Value Matrix. These are critical components or ingredients where even a minor variation can affect the end product quality adversely. When anything is strategic, the line managers have a big say on what will work. Supply Managers or Purchasing Managers always work closely with the user department to ensure that they buy what will really work.

In the next post we will discuss the second step of the B2B Buying Process of exactly how specifications are developed.

Wish everyone a Happy and Safe 2020 ThanksGiving!

About StratoServe

Service Recovery: The secret to retaining loyal customers

Service Recovery-StratoServe

All organizations are ultimately in the service business. And when people are involved- mistakes do happen. And customers can become unhappy. This is “service failure”. How you make customers happy again, is “service recovery.” Happy customers are loyal customers.

Even when you supply a tangible product the customer is looking for a great “user experience”. This includes experiences of (1) ordering the product online (2) getting an order acknowledgement (3) Shipping info (4) Unboxing experience (5) User experience with the product itself. You can think of service recovery like a great product return policy.

It’s easier to think about “Service Recovery” in the restaurant business ( yes during dine-in before/after COVID times!). You order something and what the waiter brings is different or not upto your expectations. You complain. What happens after you complain is service recovery in action. Here are some ways this can play out:

  1. Deny,Deny, Deny : The waiter denies that there is a problem. Yes this is rare in restaurants but does happen in a variety of customer situations. Some organizational cultures simply do not want to admit fault. This could be because of a variety of reasons including (a) fear of lawsuits (b) fear of being questioned on the processes in place (c) overconfidence about the unique product or service provided (d) admitting failure always involves some costs that the system is not willing to take.
  2. Listen,Apologize but Do nothing: The waiter can listen patiently/respectfully but really do nothing. Possible and viable excuses could be “the kitchen is closed for the night” etc. If there is a genuine situation , eg. its really late night customers are quite happy with this approach. They may even come back.
  3. Listen, Apologize, and Delight: Organizations that understand the value of their customer,brand and reputation have budgeted for errors. Employees are empowered to replace orders immediately. Some restaurants make a big deal of this and the manager comes to your table, apologizes and delights you with a “free” small dessert. In many organizations , the frontline service provider is authorized to directly take action like replacing or offering a “feel good” small dessert! You can bet that the customer will come back and will tell friends about the positive experience.

Whatever, your organization’s policy from the above, its critical to learn from every incident of service failure. This learning can improve your process and keep reducing service failures.

We do advocate the third option of Listen,Apologize, and Delight for your good customers. Good,loyal customers are very hard to find.

About StratoServe.

The “S” Curves of radical and incremental innovation

The “S” curves of radical and incremental innovation-StratoServe

Following a 2014 LinkedIn piece Sharpen the Saw, cut the Tree or look for non-Trees?, here is some more detail on the “S” curves of innovation (first published in 2014 and updated 2020). The “S Curve” innovation thinking is attributed to Richard Foster (1986) and made famous by Clayton Christensen in the book “Innovator’s Dilemma,” where he discusses how each successive computer hard drive industry got wiped out.

[Note: Due to the great interest of our dear readers this post was updated in January 2021]

What are the “S” curves? Each of the above S curves represent a technology platform. Movement up an “S” curve is incremental innovation while stepping down on a lower new “S” curve now, may lead to radical innovation, as the new “S” curve surpasses your existing “S” curve. There is a risk that the lower “S” curve does not get better. We only hear of technologies that won and we don’t remember those that lost. So trying out a new technology when you are doing great in your current technology is scary!

The Cost and Performance Y axis, Time on X Axis: If you look at the Y axis you see performance going up and cost coming down. Just as time goes on. In other words over time a particular S curve and technology platform gets improved. This improvement is through factors such as experience, techniques like 6 Sigma, more adoption by customer. The adoption by customer mean higher sales volumes and costs keep going down. However there is a catch for each S curve.

And that is the limit to improvement on the same technology platform. This has happened in numerous industries where dominant players in one “S” platform refused to jump down to a lower “S” curve. And became extinct.

Why is it so difficult /scary to jump onto a lower “S” curve? No one wants to come down in life by choice. And a lower “S” curve can mean less efficient performance and higher cost. It sometimes means a complete rethink of your revenue model. In the example of the music industry records,cassettes, CD’s were sold in stores and a large number of people found employment just in the sales side of the industry. With streaming music on Spotify and Apple the distribution channel and employees have disappeared.

The music industry, as shown in the image above , is a great example to understand “S” Curves:

  • 1970’s Cassette Tapes: You had workers who specialized on manufacturing cassette tapes, there were specialized suppliers and of course the Sony Walkman that made music cassettes so special. Cassettes came in 60 minutes and then 90 minute formats. Avid listeners (the final consumers) tried getting the 90 minute cassette that must have involved a lot of incremental innovation by suppliers and personnel in the plastic music cassette industry. You can visualize six-sigma and total quality programs at cassette factories, that reduced waste and defects in the product.
  • 1980’s Music CDs :The next “S” curve involved CD’s.. Suddenly you had music on CD’s that improved quality a whole lot and “Sony Discman” became popular as the cassette industry started dying, just as vinyl records had died before that. The CD industry had its own players and supply chain. CD’s went on improving and you could buy rewritable CD’s. Cars had CD players and around 2006-7 had both a Cassette player and a CD player.
  • 1990’s MP3 Player: Next off course you have the MP3 player, iPod and literally thousands of songs on your device and then the iTunes store on the cloud. The MP3 players and cloud also require a new set of employee skills and a differently skilled supply base. This is not shown in the picture.
  • 2007…. iPhone, Music Cloud of Spotify and Apple: As Tom Friedman points out in his book, Thank You For Being Late, 2007 was a tectonic shift year starting with the iPhone. If you work in any part of the music supply chain you need to adapt to the new “S” curve of cloud music. Today’s new cars do not have CD players and will allow you to connect the car audio to your phone. Or your Spotify account.

If you think about each industry, it ignored the march of technology and refused to get started on the next technology “S” curve from the current technology “S” curve. This reluctance was because at the early stages, each new “S” curve looked unattractive from the existing “S” curve.

You see that the dominant players in each technology type became extinct just because they thought that the upcoming technology was too much behind- and will never catch up. And there was a lot of resistance to change from within. By the time the new technology ( second and third curves) became really comparable in performance and cost – the incumbents of older “S” curves were too far behind.

The takeaway for all types of organizations is to have the courage to invest time, energy (more than merely money) at successive “S” curves that seem less attractive today but have the potential to vastly surpass what you offer your market today. About StratoServe.

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